World Bank Policies Fail Palestinians

The Middle East featured prominently on the agenda of last month’s annual meeting of the World Bank and International Monetary Fund in Tokyo. But how relevant are these agencies’ policy prescriptions in the context of conflict? In the case of the Occupied Palestinian Territories (OPT) they are not only inappropriate but also harmful. And yet both institutions have relentlessly dished up these prescriptions for the past two decades. To understand why they are so harmful, it is useful to deconstruct the policy recommendations in the World Bank’s latest growth report for the OPT.

The Bank’s growth report provides a breakdown of the current state of the Palestinian economy, which it describes as fragile and dependent on foreign aid. The report’s frank conclusions are largely unsurprising: aid-based growth is unsustainable, especially because aid levels are expected to decline over time. The surprising part of the report lies not in the Bank’s negative prognosis of the Palestinian economy, but rather in its recommendations. It calls for the Palestinians to emulate the Asian tigers by ‘adopting an outward orientation and integrating into world supply chains.’

Just how a people that exercises no control over its own land, borders and natural resources can carry out such export-based growth is not explained. The report further recommends that the Palestinian Authority ‘should strive to build a business environment that is among the best in the world and not merely on par with its neighbors.’ This is utterly impossible under prolonged occupation, where Palestinian civil and property rights are ignored by an Israeli state that is simultaneously engaged in the mass-expropriation of Palestinian land. The business climate is so bad that one report suggested certain Palestinian businesspersons even prefer to invest in Israel.

The report also repeats a dangerous belief long propagated by the World Bank: That the Palestinian economy can benefit from deeper integration with the Israeli economy. Actual experience indicates otherwise. The Palestinian economy has been de-developed since 1967, as Sara Roy’s work has shown, and Palestinian industry has been deliberately sabotaged in favor of Israeli industry, as Shir Hever documents.

Classic World Bank economic assumptions that recommend ‘free trade agreements between a future Palestinian state, Israel and neighboring countries’ have never been embraced by Israel. Palestinians cannot exploit ‘competitive advantages’ because Israel deliberately prevents them. Instead, integration has been one-sided, allowing Israel to exploit a captive Palestinian market cut off from the outside world.

It is vital to understand the extent to which much of the World Bank’s policy advice is destined for failure because it exercises enormous influence on foreign aid to the OPT and its recommendations form the basis on which international donors design their aid programs. In fact, it designed the aid regime adopted by the international community during the Oslo Peace Process of the early 1990s. Since that time, the Bank has prescribed policy recommendations for donors that do not take into account the human reality of Palestinians struggling to survive for decades under a violent military occupation and in colonial conditions.

Nor have the international community and those many prominent international bodies engaged in the ‘peace process,’ such as the World Bank, held Israel to account for its actions. Indeed, the Bank sanitizes the language it uses when criticizing the occupation, employing euphemisms that downplay the effects of occupation while focusing on the Palestinians when giving reasons why Bank recommendations have failed.

As they met with the world’s delegations in Tokyo, did the World Bank and IMF question their policies and the need to actually reflect the ‘facts on the ground’? Until and unless they do, they will waste valuable time and resources and distract Palestinians from what should be their primary goal: Ending the military occupation as a first step toward sovereignty, freedom, and self-determination.

Until Palestinian rights are secured, it is meaningless to develop aid programs that do not take into account the full impact of the occupation and the expropriation of Palestinian land. The Bank’s growth report is useful only in revealing that the Palestinian economy is in a critical state of disrepair. Its inability to provide policy recommendations that properly account for the effects of occupation renders its advice irrelevant.

It is time to look for alternative models of aid, ones that do not simply seek new ways for the Palestinians to cope with life under occupation, but rather challenge the status quo while enabling Palestinians to survive, by, for example, promoting investment in smallholder agriculture. This alone can lead to real economic growth and sustainable development.

Alaa Tartir, Program Director of Al-Shabaka: The Palestinian Policy Network, is the author of The role of international aid in development: the case of Palestine 1994-2008 (Lambert 2011) and Jeremy Wildeman, an Al-Shabaka Guest Author, co-founded the Nablus-based charity Project Hope.